Cola Wars Continue - Coke & Pepsi in the Twenty-First Century

Competitive Strategy[pic 1]

2018-19 (Term-2)

Group Assignment 1

Cola Wars Continue:

Coke & Pepsi in the Twenty-First Century

Group – L12

Harsh Vardhan (61910582)

Oshin Aggarwal (61910336)

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Saroj Jadhav (61910789)

Suvigya Awasthi (61910536)

Q1. Why has the soft drink industry been so profitable?[pic 3]

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The soft drink industry has historically been a very profitable industry because the core product has a low cost to production, the consumption has witnessed a steady growth and the industry has been dominated by Coca-Cola and Pepsi for over a century now (which together hold more than 70% of

Porter’s Five Force analysis further demonstrates how the market forces favor high profitability in the Soft drink industry.

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the market share), creating almost a duopoly market.

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• Since the 1970s the cola industry has grown by an average of 3% year on year.

• From 1975 to 1995 Coke and Pepsi both achieved average annual growth of about 10%.

• The Americans consumed cola more than any other beverage.

• The competition between Coke and Pepsi increased the brand recognition for each other. We may conclude that marketing added to both companies profits rather than eating up.

• Coke and Pepsi both have an average Net profit/sales of about 10.65%.

• Combined market share of 75.5% in the year 2000.

Threat of

New

Entrants:

LOW

Switching costs are low.

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High number of suppliers.

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Threat from

substitute

products:

LOW

High entry costs. High Brand Loyalty for Coke & Pepsi.

Market almost a duopoly

between Coke & Pepsi.

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Bargaining

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Power of

Buyers:

MODERATE

Diversification into Non-CSD drinks by existing players to protect from substitutes.

Q2. Compare and analyse the economics of the concentrate business to[pic 17]

the bottling business.

The concentrate business and bottling business in the US CSD market worked in close association with each other but differed in the following areas:

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Even with a higher net sales for the Bottlers in the U.S, the net profit for the Concentrate Producers (35%) was higher than Bottlers (9%) because of the high COGS of Bottlers

Q3. Can Coke and Pepsi sustain their profit in future ? Why ?[pic 32]

...